) Related Party Transaction

as compared to that of the same period in the previous year. 4) Tap water charge rates of the Company and Pathum Thani Water increased as compared to those in the previous year. B. Costs of Sales of tap water and Costs of Service The cost of sales of tap water of the Company and its subsidiaries mainly comprised depreciation,amortization of assets used in the tap water production and distribution, and expenses in tap water production and distribution which are costs of electricity, chemical substances and supplies. In 2007, the Company and its subsidiaries had costs of sales of tap water and costs of service in total of Baht 780.80 million, representing an increase by 284.66 million or 57.37 percent as compared to that in 2006. The entire amounts of the increased were from Pathum Thani Water's and BJT Water's costs of sales of tap water and costs of service from July 2007 to December 2007. During the nine-month period of 2008, the Company and its subsidiaries recorded the costs of sales of tap water and costs of service amounting to Baht 867.27 million, representing an increase by Baht 358.69 million or 70.53 percent as compared to that of the same period in the previous year, which can be explained as follows: 1) During the nine-month period of 2007, the Company recorded Pathum Thani Water's costs of sales of tap water and costs of service in the consolidated financial statements for three months from July 2007 to September 2007, amounting to Baht 119.60 million. 2) The total tap water sales volume of the Company increased by 12.81 million cubic meters or 18.96 percent as compared to same period in the previous year, resulting to an increase in cost of tap water production. 3) The total tap water sales volume of Pathum Thani Water increased by 1.0 million cubic meters or 3.19 percent as compared to that of the third quarter in the previous year, resulting to an increase in cost of tap water production. 4) The maintenance fee of the Company and its subsidiaries increased by Baht 42 million due to relocation of pipe alignment and adjustment of basic infrastructure. C. Selling and Administrative Expenses In 2007, the Company and its subsidiaries had selling and administrative expenses totaling Baht 158.05 million, representing an increase by Baht 52.99 million or 50.44 percent as compared to that in 2006. The entire amount of the increase was from Pathum Thani Water's and BJT Water's selling and administrative expenses from July 2007 to December 2007. During the nine-month period of 2008, the Company and its subsidiaries recorded the selling and administrative expenses amounting to Baht 133.59 million, representing an increase by Baht 19.66 million or 17.26 percent as compared to that of the same period of the previous year, which can be explained as follows: 1) During the nine-month period of 2007, the Company recorded and included Pathum Thani Water's selling and administrative expenses in the selling and administrative expenses in the consolidated financial statements for merely three months from July 2007 to September 2007, amounting to merely Baht 22.09 million. 2) During the nine-month period of 2007, the Company had fees from loans for purchase of ordinary shares in Pathum Thani Water amounting to Baht 16.0 million. 3) During the nine-month period of 2007, Pathum Thani Water had fees from loans for construction of a new water treatment plant amounting to Baht 4 million. D. Amortization of the Right to Produce and Distribute Tap Water In 2007, the Company and its subsidiaries had amortization of the right to produce and distribute tap water amounting to Baht 89.49 million, representing an increase by 100 percent as compared to that of 2006. The entire increased amortization was a result of the Company's payment for purchase of ordinary shares in Pathum Thani Water at the price higher than the fair value of the assets used in Pathum Thani Water's tap water production. Such right would be amortized by Baht 197 million per year commencing from the year 2007 onwards. During the nine-month period of 2008, the Company and its subsidiaries recorded the amortization of the right to produce and distribute tap water amounting to Baht 146.34 million, representing an increase by Baht 101.59 million or 227.02 percent as compared to that of the same period of the previous year, since the Company started amortizing such right in July 2007 by Baht 49.1 million per quarter. E. Interest Expenses In 2007, the Company and its subsidiaries had interest expenses totaling Baht 637.64 million, representing an increase by Baht 200.62 million or 45.91 percent as compared to that of 2006. The entire amount of increased interest expenses was Pathum Thani Water's interest expenses from July 2007 to December 2007. During the nine-month period of 2008, the Company and its subsidiaries recorded the interest expenses amounting to Baht 542.13 million, representing an increase by Baht 113.40 million or 26.45 percent as compared to that of the same period of the previous year, which can be explained as follows: 1) During the nine-month period of 2007, the Company recorded Pathum Thani Water's interest expenses in the consolidated financial statements for three months from July 2007 to September 2007, amounting to Baht 54.82 million. 2) The Company made a repayment for short-term loan amounting to Baht 3,000 million and long-term loan amounting to Baht 753.0 million. 3) Pathum Thani Water made a repayment for long-term loan amounting to Baht 226.51 million. F. Corporate Income Tax In 2007, the subsidiaries had corporate income tax totaling Baht 14.04 million, representing an increase by Baht 11.97 million or 578.26 percent as compared to that of 2006. The entire amount of the increase was from BJT corporate income tax from July 2007 to December 2007. During the nine-month period of 2008, the subsidiaries recorded the corporate income tax amounting to Baht 4.56 million, representing a decrease by Baht 7.74 million or 62.93 percent as compared to that of the same period in the previous year. This due to a decrease of BJT's revenue from service derived from Pathum Thani Water as compared to that of the same period in the previous year. G. Total Net Profit In 2007, the Company and its subsidiaries had total net profit amounting to Baht 920.05 million, representing an increase by Baht 245.64 million or 36.42 percent as compared to that of 2006. The entire amount of the increase in net profit was from the inclusion of the operation results of Pathum Thani Water and BJT from July 2007 to December 2007. During the nine-month period of 2008, the Company and its subsidiaries recorded a total net profit of Baht 968.84 million, representing an increase by Baht 285.44 million or 41.77 percent as compared to that of the same period in the previous year, since the increase in total revenue of the Company and its subsidiaries was more than the increase of the total expenses as compared to that of the same period in the previous year. Analysis of Financial Position Total Assets The total assets of the Company and its subsidiaries mainly comprised cash and cash equivalents and temporary investments, trade accounts receivable, property, plant and equipment, assets for production of treated water of its subsidiary and the right to produce and distribute tap water. On 31 December 2007 and 30 September 2008, the Company and its subsidiaries had the total assets amounting to Baht 18,681.15 million and Baht 18,452.31 million, respectively. A. Cash and Cash Equivalents and Temporary Investments As of 31 December 2007, the Company and its subsidiaries had the cash and cash equivalents and temporary investments amounting to Baht 1,522.15 million, representing an increase by Baht 471.02 million or 44.81 percent, as compared to that of 31 December 2006, due to an increase in the cash balance from the Company's operation in 2007. The Company also included such item of Pathum Thani Water and BJT amounting to Baht 228.92 million in the consolidated financial statements. As of 30 September 2008, the Company and its subsidiaries had the cash and cash equivalents and temporary investments amounting to Baht 1,674.72 million, representing an increase by Baht 152.56 million or 10.02 percent, as compared to that of 31 December 2007, due to an increase in the cash balance from operations of the Company and its subsidiaries. B. Trade Accounts Receivable As of 31 December 2007, the Company and its subsidiaries had a trade accounts receivable amounting to Baht 292.70 million, representing an increase by Baht 75.1 million or 34.51 percent, as compared to that of 31 December 2006, due to the fact that the Company included trade accounts receivable of Pathum Thani Water and BJT amounting to Baht 106.76 million in the consolidated financial statements, and the total distributed tap water and tap water charge rates of the Company increased. However, if compared the Company's trade accounts receivable as of 31 December 2007 and 2006, the trade accounts receivable decreased by Baht 31.66 million. That was because, as of 31 December 2006, the Company recorded compensation from the PWA's purchase of tap water less than the designated minimum quantity amounting to Baht 69.3 million, while as of 31 December 2007, the Company did not record such compensation. Should such item be excluded, the Company would have had a trade accounts receivable amounting to Baht 148.26 million as of 31 December 2006. As of 30 September 2008, the Company and its subsidiaries had the trade accounts receivable amounting to Baht 330.49 million, representing an increase by Baht 37.79 million or 12.91 percent, as compared to that of 31 December 2007, due to the fact that the Company and Pathum Thani Water had an increase in the total tap water sale volume, and also the tap water charge rates had increased from that in the previous year. C. Property, Plant and Equipment As of 31 December 2007, the Company and its subsidiaries had the net property, plant and equipment amounting to Baht 9,196.86 million, representing a decrease by Baht 159.10 million or 1.70 percent, as compared to that of 31 December 2006, mainly due to depreciation of the Company and its subsidiaries amounting to Baht 288.89 million and additional purchase of property, work under construction and equipment amounting to Baht 116.43 million. As of 30 September 2008, the Company and its subsidiaries had net property, plant and equipment amounting to Baht 8,992.35 million, representing a decrease by Baht 204.51 million or 2.22 percent, as compared to that of 31 December 2007, due to depreciation of the Company and its subsidiaries amounting to Baht 250.92 million and additional purchase of equipment and work under construction amounting to Baht 46.43 million. D. Assets for Tap Water Production of Pathum Thani Water As of 31 December 2007, the net assets for tap water production amounted to Baht 4,258.20 million, representing an increase by 100 percent, as compared to that of 31 December 2007, due to the Company's investment in ordinary shares in Pathum Thani Water, representing 98 percent, thereby causing the Company to include the assets for tap water production of Pathum Thani Water amounting to Baht 4,189.09 million in the consolidated financial statements. As of 30 September 2008, the net assets for tap water production amounted to Baht 4,168.55 million, representing a decrease by Baht 89.66 million or 2.11 percent, as compared to that of 31 December 2007, due to amortization of assets for tap water production of Pathum Thani Water amounting to Baht 174.15 million and an increase in work under construction of Pathum Thani Water by Baht 87.78 million. E. Right to Produce and Distribute Tap Water As of 31 December 2007, the Company had the net right to produce and distribute tap water amounting to Baht 3,079.62 million, representing an increase by 100 percent, as compared to that of 31 December 2006. Such increase was a result of the Company's purchasing of ordinary shares in Pathum Thani Water at the higher price than the fair value of the assets used in Pathum Thani Water's tap water production. Such right would be amortized by Baht 197 million per year commencing from July 2007 onwards. As of 30 September 2008, the Company had the net right amounting to Baht 2,933.28 million, representing a decrease by Baht 146.34 million or 4.75 percent, as compared to that of 31 December 2007, due to the fact that the Company recorded the amortization of such right as expense amounting to Baht 146.34 million, whereby such right would be amortized as expense throughout the remaining term of the agreement between Pathum Thani Water and the PWA, or amounting to Baht 195 million per year. Total Liabilities The total liabilities of the Company and its subsidiaries as of 31 December 2007 and 30 September 2008 mainly comprised bank overdrafts, short-term loans and long-term loans from financial institutions, representing 97.93 percent and 98.70 percent, respectively. As of 31 December 2007, the Company and its subsidiaries had the short-term loans and long-term loans totaling Baht 13,677.95 million, representing an increase by Baht 6,957.95 million or 103.54 percent, as compared to that of 31 December 2006, due to the fact that the Company borrowed loans from financial institutions amounting to Baht 3,998.4 million and made a loan repayment amounting to Baht 700 million, and the Company included the loan of Pathum Thani Water amounting to Baht 3,659.64 million in the consolidated financial statements. As of 30 September 2008, the Company and its subsidiaries had the short-term loans and long-term loans from financial institutions amounting to Baht 9,780.65 million, representing 98.70 percent of the total liabilities. As of 30 September 2008, the loans from financial institutions decreased by Baht 3,897.30 million or representing a decrease by 28.49 percent due to the fact that the Company repaid the short-term loan and long-term loan amounting to Baht 3,000 million and Baht 753 million, respectively, and Pathum Thani Water made a loan repayment amounting to Baht 226.51 million and made a loan drawdown amounting to Baht 82.21 million. Shareholders' Equity As of 31 December 2007, the Company and its subsidiaries had the shareholders' equity amounting to Baht 4,714.77 million, representing an increase by Baht 824.91 million or 21.21 percent, as compared to that of 31 December 2006, due to the fact that cash received from offering for sale of 40 million ordinary shares at the price of Baht 1.20 per share amounted to Baht 48.0 million, the net profits of the Company and its subsidiaries amounted to Baht 920.05 million, the dividend payment amounted to Bath 162.50 million, and the minority shareholders' equity increased by Baht 19.36 million. As of 30 September 2008, the Company and its subsidiaries had the shareholders' equity amounting to Baht 8,543.20 million, representing an increase by Baht 3,828.43 million or 81.20 percent, as compared to that of 31 December 2007, due to the fact that in May 2008, the Company offered for sale 700 million new ordinary shares at the price of Baht 4.20 per share, thereby rendering the net proceeds received, after deduction of the underwriting fee, amounting to Baht 2,854.77 million, and during the period, the Company and its subsidiaries had the net profit amounting to Baht 975.66 million. Analysis of Cash Flow Cash Flow from Operating Activities In 2007, the Company and its subsidiaries had cash flow from operating activities amounting to Baht 983.82 million, representing an increase by Baht 243.57 million or 32.90 percent, as compared to that of 31 December 2006, due to improved results of operations, namely, the total distributed tap water increased, tap water charge rates increased from those of the previous year, and the results of operations of Pathum Thani Water and BJT from July 2007 to December 2007 were included in the consolidated financial statements. In the nine-month period of 2008, the Company and its subsidiaries had cash flow from operating activities amounting to Baht 1,394.49 million, representing an increase by Baht 803.73 million, as compared to that of the same period of the previous year, due to 1) an increase of the total distributed tap water and tap water charge rates from those of the previous year and 2) inclusion of Pathum Thani Water's cash flow from operating activities in which the Company started investing in June 2007 for the full period, while during the nine-month period of 2007, the Company included Pathum Thani Water's cash flow from operating activities for the third quarter of 2007 only. Cash Flow from Investing Activities In 2007, the Company and its subsidiaries had cash flow from investing activities amounting to Baht 4,360.87 million, representing an increase by Baht 3,261.16 million or 296.55 percent, as compared to that of 2006, mainly due to the fact that in 2007, the Company invested in ordinary shares in Pathum Thani Water amounting to Baht 3,998.4 million, property and equipment increased by Baht 101.43 million, assets for tap water production increased by Baht 276.84 million. In 2006, most of the investment capital was used for investment in ordinary shares in WaterFlow amounting to Baht 660.54 million and deposit for land purchase amounting to Baht 15 million. In the nine-month period of 2008, the Company and its subsidiaries had cash flow from investing activities amounting to Baht 54.88 million or representing an increase by Baht 3,972.03 million, due to the fact that in June 2007, the Company invested in Pathum Thani Water, with the cash value payable totaling Baht 3,498.49 million, representing 89.31 percent of the cash flow used in investing activities in the nine-month period of 2007. Cash Flow from Financing Activities In 2007, the Company and its subsidiaries had cash flow from financing activities amounting to Baht 3,695.82 million, representing an increase by Baht 3,367.82 million or 1,026.77 percent, due to the fact that the Company borrowed the loans amounting to Baht 3,998.4 million for purchase of ordinary shares in Pathum Thani Water, cash received from offering for sale of shares to employees amounted to Baht 48 million, and loan repayment amounted to Baht 700 million. In the nine-month period of 2008, the Company and its subsidiaries had cash flow used in financing activities amounting to Baht 1,044.53 million, mainly comprising the net cash received from issuance of ordinary shares for capital increase amounting to Baht 2,854.77 million, loan drawdown by Pathum Thani Water amounting to Baht 82.21 million, short-term loan repayments by the Company amounting to Baht 3,000 million, long-term loan repayments by the Company and Pathum Thani Water amounting to Baht 979.51 million and dividend payment to the minority shareholders amounting to Baht 2.0 million. Key Financial Ratio Current Ratio Current ratio of the Company and its subsidiaries as of 31 December 2007 decreased as compared to that of 31 December 2006, due to the fact that during the year 2007, the Company borrowed short-term loan from financial institutions amounting to Baht 3,000 million, with the interest rate of MLR-0.5 percent, thereby causing the Company to incur interest expenses of Baht 16 million per month since July 2007 onwards. However, during the year 2008, the Company and Pathum Thani Water had increased revenue from sales of tap water, and the Company repaid such short-term loans in full in May 2008, thereby rendering the current ratio of the Company and its subsidiaries as of 30 September 2008 to gradually improve. Profitability Ratio The total profitability ratio of the Company and its subsidiaries in 2007 was less than that of 2006 since the Company was liable to interest expense burden of short-term loans and amortization of the right to produce and distribute tap water. However, upon the Company's short-term loan repayment and the Company's and Pathum Thani Water's long-term loan repayments during the year 2007, together with an increase in the total distributed tap water of the Company and its subsidiaries and an increase in tap water charge rates from the previous year, the profitability ratio as a whole would recover. Efficiency Ratio The rate of return on assets for the year 2007 was less than that for the year 2006 since the Company invested in ordinary shares in Pathum Thani Water during the mid-year 2007, and recognized the results of operations of Pathum Thani Water and BJT during the second half of 2007, thereby resulting in decrease of the rate of return on assets in 2007. However, the rate of return on assets for the nine-month period of 2008 improved since the (more)